Senator Rand Paul and Representative Thomas Massie have re-introduced a bill in Congress to audit the Federal Reserve. The Federal Reserve Transparency Act of 2017 would require that the Government Accountability Office (GAO) “conduct a thorough audit of the Federal Reserve’s Board of Governors and reserve banks within one year of the bill’s passage.”
Rep. Massie (R-KY) stated: “It is time to force the Federal Reserve to operate by the same standards of transparency and accountability to the taxpayers that we should demand of all government agencies.” “The American public deserves more insight into the practices of the Federal Reserve… Behind closed doors, the Fed crafts monetary policy that will continue to devalue our currency, slow economic growth, and make life harder for the poor and middle class.”
Legislation to audit the Fed has met with mixed success since the 2008 economic crisis. The House passed similar measures in 2012, 2014 and 2016, all to be defeated in the Senate. The Government Accountability Office, however, did gain some limited oversight powers and performed a one-time audit pursuant to the 2010 Dodd-Frank financial reform act. That audit uncovered the $16 trillion in secret loans which were used to bail out US banks as well as foreign banks and businesses, but the GAO was prohibited from auditing the Fed’s monetary policy decisions.
Senator Paul’s measure would authorize the GAO to review more information as part of an audit, including their monetary policy decisions, and hopefully provide some accountability for their actions. The many proponents of the bill further argue that the Fed is too powerful and lacks sufficient oversight for its policy and interest rate decisions.
Critics of the bill warn that it will give lawmakers too much information and could subject the Fed to undue political pressure and discourage it from taking unpopular steps for the good of the overall economy. Needless to say the proposal was very vocally opposed by Federal Reserve Chairwoman Janet Yellen last year.
“To date no institution holds more power over the future of the American economy and the value of our savings than the Federal Reserve,” said Sen. Paul, “yet Fed Chair Yellen refuses to be fully accountable to the people’s representatives.”
Senator Paul has a point. The Federal Reserve is an entity all to itself with unprecedented power.
President-elect Donald Trump had also been a vocal supporter of auditing the Fed and even reining it in more broadly. When he was on the campaign trail, President-elect Trump blasted the central bank’s politically motivated manipulation of the U.S. economy and its artificially low-interest rates. He also denounced the “very false economy” propped up by Fed monetary gimmicks. “It is so important to audit The Federal Reserve,” Trump said, echoing comments made by his advisers and associates.
The Federal Reserve has enormous power over the U.S. economy and is supposedly designed to be independent of Congress and the President. And, because of that, it has been the target of suspicion and conspiracy theories since it was founded in 1913.
All the more reason we should audit the Federal Reserve and let the sunshine in.
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
